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Paradyne Networks (PDYN – 4-9/64) manufactures broadband and narrowband network access products. The company sells its products to businesses including Lucent Technologies (27 percent of PDYN's sales), AT&T, and Citigroup. On September 28, the shares gapped over 40 percent lower after announcing that third-quarter earnings would fall significantly below analysts' expectations. The stock has since been unable to recover from this drubbing. For the past month, the equity has been wedged in a trading range between the 3-1/2 and 4-1/2 levels.
Yesterday, something strange was afoot on the PDYN December 5 call. Previously home to only 40 contracts, this back-month position saw 10,080 contracts trade yesterday, all of which translated into new open interest. Shortly before 10:15 a.m. yesterday, two large blocks consisting of 800 and 9,280 contracts crossed the tape. The smaller block traded between the bid and the ask prices, while the large block went off at the bid price of 5/16 per contract. The number of open calls at this strike is now nearly equal to open interest at the November 5 call, which weighs in at 10,200 contracts. By alarming contrast, the site of heaviest put open interest is the April 10 put, where a mere 264 contracts reside.